Canadian company explores Livengood gold prospect

FAIRBANKS — Soon after prospectors began searching for gold around Livengood more than a century ago, a distinctive 1,800-foot-tall hilltop in the area was given a hopeful name: Money Knob.

But despite the persistence of countless placer miners, Money Knob never delivered the mother lode. Their instinct for gold was right, it turns out, but not necessarily their timing.

The prospect is peppered heavily with gold — more than 20 million ounces of it, by the latest estimate — but it’s scattered throughout the rock in microscopic quantities.

Using the newest techniques, the International Tower Hill mining company thinks it can now get the gold that previous generations of miners couldn’t.

“They were good people,” said Tom Irwin, the general manager of ITH’s Livengood prospect. “They knew it was there, they just didn’t have the technology to find it.”

The Canadian mining company is working to change that in the next decade, charting out an exploratory plan that could eventually result in the biggest producing gold mine in Alaska. The prospect covers more than 50,000 acres on a site located about 80 miles north of Fairbanks.

A preliminary study on the feasibility of a mine at the site is due this summer, but work thus far has made ITH officials believe Money Knob’s time may have finally arrived.

“The burden to make this a mine is on us,” said Irwin, a former commissioner of the Alaska Department of Natural Resources. “We have all the right conditions.”

Intriguing prospect

The thought of a huge new gold source in the Interior has sparked the interest of more than ITH. Although the prospect site consists of a few snow-covered hilltops today, dozens of visitors from the Alaska Miners Association packed a tour bus on March 24 to check out the site.

Even if it cruises through the permitting process, the mine won’t be operational until at least 2018 following more than two years of construction. Nevertheless, mining enthusiasts and industry officials happily sat through lectures about ore content and environmental studies in the area.

The area has been heavily mined for nearly a century, from mom-and-pop placer mining operations to a large commercial venture that halted work in 1998. The prospective mine site is covered with evidence from that activity, as webs of rutted mining roads and piles of tailings are scattered around the landscape.

Old log-built mining cabins in various states of decay dot the area.

A half-million ounces of gold have been hauled out of the Livengood Mining District through the years, but there are no rich veins to be seen at the ITH Livengood prospect. Carl Schaefer, a geologist working at the site for Northern Associates Inc., said gold at the Livengood site is instead measured in grams per ton.

The richest cores found so far come in at about 12 grams per ton, the lowest at about 0.6 grams. But those grams add up — the latest estimates after 800 core-sample tests indicate 16.5 million ounces of gold are present at the prospect site, with an additional 4.1 million ounces inferred through those tests.

The mine could conceivably be twice the size of the Fort Knox Mine, an open pit mine north of Fairbanks that has produced more than 5 million ounces of gold.

To extract the recoverable portion of that gold, ITH expects to process about 100,000 tons of ore per day during the projected 23-year life of the mine — a total of 750 million tons of rock. The material will be hauled away, crushed in a mill and ground to a consistency that allows the invisible specks of gold to be removed. Mine officials say a specific extraction method still hasn’t been determined.

ITH employs 54 people during the current winter exploration season and expects to fill about 130 jobs this summer. The staging area for those operations is an old Elliott Highway pipeline construction camp near the prospect.

If the mine proceeds, those numbers will grow significantly. The mine’s planners figure about 1,100 people will be employed during a construction phase that will last at least two years. When the mine is operating, an estimated 500 people will have jobs.

ITH is also banking on the Livengood prospect. The company’s stock has plummeted by more than 50 percent in the past year, and CEO Jim Komadima sent a letter to shareholders last week urging patience. He cited Livengood as a reason for optimism.

ITH has spent about $100 million in the past five years to evaluate the prospect, with nearly $70 million more budgeted for this year. Komadima called Livengood “undisputedly one of the largest new gold discoveries made in the last two decades.”

“What will not waver is our commitment to advancing the Livengood project toward becoming a new, large-scale gold project in North America,” Komadima wrote. “I invite you to grow with us.”

Big money, big challenges

As far as mine conditions go, Irwin agrees there are plenty of reasons to believe ITH has scored big. The deposit is huge, gold prices are high and a well-maintained highway leads almost directly to the site. Although a formal plan still hasn’t been submitted, Irwin said, he believes ITH will eventually be able to navigate the complex permitting process.

For such a massive project, the mine proposal has registered relatively little environmental controversy. The Northern Alaska Environmental Center, which monitors mineral resource development in the Interior, said it has no current plans to oppose the mine.

Pete Dronkers, the clean water and mining program director for NAEC, said a long history of mining in the area and a favorable location seem to make it a relatively benign spot for an open pit mine.

But Dronkers said that doesn’t mean the mine will get a free pass. If it appears the eventual plan will produce acidic drainage, he said, it will trigger much more scrutiny. NAEC would also be concerned if the mine’s massive electricity demands necessitate the construction of a new coal-fired power plant in the area.

So far, however, he said it’s not among the organization’s big concerns.

“At this point, we don’t have any reason to believe there’s going to be any outstanding liabilities,” he said.

Despite that, Irwin said, some big challenges are ahead. He acknowledges that the 80-mile distance between Fairbanks and the mine is vexing. It’s close enough for a hefty commute, albeit a worrisome one in the winter months. It’s far enough to argue for an on-site camp, which would add expense and wouldn’t excite some workers.

“We’re an awkward distance away,” Irwin said. “We’re trying to sort out what’s best for safety.”

The power needs for the project will also be enormous — Golden Valley Electric Association is discussing a 100-megawatt transmission line as a new source of energy to Livengood. That’s nearly as much as Fairbanks-area users require collectively and would require a new 50-mile-long line across state and federal land, which ITH will need to fund.

And despite the rich resource, the infrastructure needs of a big mine can be enormous. An operating mine would draw about 30 percent of its expenses from just electricity and fuel, Irwin estimates.

Still, he said, the situation is enviable by the standards of most rural Alaska mines.

“We have good conditions here,” Irwin said. “Who else has a paved road to their mine site? Who has a railhead they can easily get to?”

Steve Newkirk, the senior geologist for the project, also illustrated the attractive economics that underpin the project. Gold prices closed Friday at nearly $1,670 an ounce, more than five times their value a decade ago.

Various mine scenarios are being developed, with each factoring in where gold can be extracted profitably. Some of those configurations factor in prices as high as $2,100 per ounce, Newkirk said, a tally that would have seemed staggering just a few years ago.

With that reality, the prospects of the Livengood mine look to be brightening further.